Edgar Filing: DOMINION RESOURCES INC /VA/

Large accelerated filer

Accelerated filer

Non-accelerated filer

¨ (Do not check if a smaller reporting company)

Smaller reporting company

10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2014

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to


Commission File Number	Exact name of registrants as specified in their charters, address of principal executive offices and registrants’ telephone number	I.R.S. Employer Identification Number
001-08489	DOMINION RESOURCES, INC.	54-1229715

001-02255	VIRGINIA ELECTRIC AND POWER COMPANY	54-0418825

333-195066	DOMINION GAS HOLDINGS, LLC	46-3639580

120 Tredegar Street

Richmond, Virginia 23219

(804) 819-2000

State or other jurisdiction of incorporation or organization of the registrants: Virginia

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Dominion Resources, Inc. Yes x No ¨ Virginia Electric and Power Company Yes x No ¨

Dominion Gas Holdings, LLC Yes ¨ No x

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Dominion Resources, Inc. Yes x No ¨ Virginia Electric and Power Company Yes x No ¨

Dominion Gas Holdings, LLC Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Dominion Resources, Inc.

Virginia Electric and Power Company

Dominion Gas Holdings, LLC

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Dominion Resources, Inc. Yes ¨ No x Virginia Electric and Power Company Yes ¨ No x

Dominion Gas Holdings, LLC Yes ¨ No x

At June 30, 2014, the latest practicable date for determination, Dominion Resources, Inc. had 582,667,882 shares of common stock outstanding and Virginia Electric and Power Company had 274,723 shares of common stock outstanding. Dominion Resources, Inc. is the sole holder of Virginia Electric and Power Company’s common stock. Dominion Resources, Inc. holds all of the membership interests of Dominion Gas Holdings, LLC.

This combined Form 10-Q represents separate filings by Dominion Resources, Inc., Virginia Electric and Power Company and Dominion Gas Holdings, LLC. Information contained herein relating to an individual registrant is filed by that registrant on its own behalf. Virginia Electric and Power Company and Dominion Gas Holdings, LLC make no representations as to the information relating to Dominion Resources, Inc.’s other operations.

DOMINION GAS HOLDINGS, LLC MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a) AND (b) OF FORM 10-Q AND IS FILING THIS FORM 10-Q UNDER THE REDUCED DISCLOSURE FORMAT.

COMBINED INDEX


		Page Number
	Glossary of Terms		3

	PART I. Financial Information

Item 1.	Financial Statements		6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		76
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		92
Item 4.	Controls and Procedures		94

	PART II. Other Information

Item 1.	Legal Proceedings		95
Item 1A.	Risk Factors		95
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		97
Item 6.	Exhibits		97

PAGE 2

GLOSSARY OF TERMS

The following abbreviations or acronyms used in this Form 10-Q are defined below:


Abbreviation or Acronym		Definition
2013 Equity Units		Dominion's 2013 Series A Equity Units and 2013 Series B Equity Units issued in June 2013

2014 Equity Units		Dominion's 2014 Series A Equity Units issued in July 2014

AFUDC		Allowance for funds used during construction

AMR		Automated meter reading program deployed by East Ohio

AOCI		Accumulated other comprehensive income (loss)

AROs		Asset retirement obligations

ARP		Acid Rain Program, a market-based initiative for emissions allowance trading, established pursuant to Title IV of the CAA

ASLB		Atomic Safety and Licensing Board

ATEX line		Appalachia to Texas Express ethane line

BACT		Best available control technology

bcf		Billion cubic feet

Bear Garden		A 590 MW combined cycle, natural gas-fired power station in Buckingham County, Virginia

Blue Racer		Blue Racer Midstream, LLC, a joint venture with Caiman

BOD		Board of Directors

BP		BP Wind Energy North America Inc.

Brayton Point		Brayton Point power station

BREDL		Blue Ridge Environmental Defense League

Brunswick County		A 1,358 MW combined cycle, natural gas-fired power station under construction in Brunswick County, Virginia

CAA		Clean Air Act

Caiman		Caiman Energy II, LLC

CAIR		Clean Air Interstate Rule

CEO		Chief Executive Officer

CERCLA		Comprehensive Environmental Response, Compensation and Liability Act of 1980, also known as Superfund

CFO		Chief Financial Officer

CO₂		Carbon dioxide

COL		Combined Construction Permit and Operating License

Companies		Dominion, Virginia Power and Dominion Gas, collectively

Cooling degree days		Units measuring the extent to which the average daily temperature is greater than 65 degrees Fahrenheit, calculated as the difference between 65 degrees and the average temperature for that day

Corporate Unit		A stock purchase contract and 1/20 interest in a RSN issued by Dominion

Cove Point		Dominion Cove Point LNG, LP

Cove Point LNG Facility		An LNG import/regasification and storage facility located on the Chesapeake Bay in Lusby, Maryland

CPCN		Certificate of Public Convenience and Necessity

CSAPR		Cross State Air Pollution Rule

CWA		Clean Water Act

D.C.		District of Columbia

DEI		Dominion Energy, Inc.

DOE		Department of Energy

Dominion		The legal entity, Dominion Resources, Inc., one or more of its consolidated subsidiaries (other than Virginia Power and Dominion Gas) or operating segments or the entirety of Dominion Resources, Inc. and its consolidated subsidiaries

Dominion Gas		The legal entity, Dominion Gas Holdings, LLC, one or more of its consolidated subsidiaries or operating segment, or the entirety of Dominion Gas Holdings, LLC and its consolidated subsidiaries

Dominion Gas 2013 Senior Notes		The $400 million 2013 Series A 1.05% Senior Notes due 2016, $400 million 2013 Series B 3.55% Senior Notes due 2023 and $400 million 2013 Series C 4.80% Senior Notes due 2043

Dominion Iroquois		Dominion Iroquois, Inc., which holds a 24.72% general partnership interest in Iroquois

Dominion NGL Pipelines, LLC		The initial owner of the 58-mile G-150 pipeline project, which is designed to transport approximately 27,000 barrels per day of NGLs from Natrium to an interconnect with the ATEX line of Enterprise near Follansbee, West Virginia

PAGE 3


Abbreviation or Acronym		Definition

DRS		Dominion Resources Services, Inc.

DSM		Demand-side management

Dth		Dekatherm

DTI		Dominion Transmission, Inc.

DVP		Dominion Virginia Power operating segment

East Ohio		The East Ohio Gas Company, doing business as Dominion East Ohio

Elwood		Elwood power station

Energy Capital Partners		A private equity firm with offices in Short Hills, New Jersey and San Diego, California

Enterprise		Enterprise Product Partners, L.P.

EPA		Environmental Protection Agency

EPC		Engineering, procurement and construction

EPS		Earnings per share

ESBWR		General Electric-Hitachi's Economic Simplified Boiling Water Reactor

FERC		Federal Energy Regulatory Commission

Flex MMP Stock		Virginia Power's Flexible Money Market Cumulative Preferred Stock 2002 Series A

Fowler Ridge		A wind-turbine facility joint venture between Dominion and BP in Benton County, Indiana

FTRs		Financial transmission rights

GAAP		U.S. generally accepted accounting principles

Gal		Gallon

GHG		Greenhouse gas

Heating degree days		Units measuring the extent to which the average daily temperature is less than 65 degrees Fahrenheit, calculated as the difference between 65 degrees and the average temperature for that day

House Bill 95		Ohio utility reform legislation effective September 2011

Illinois Gas Contracts		A Dominion Retail natural gas book of business consisting of residential and commercial customers in Illinois

INPO		Institute of Nuclear Power Operations

IRCA		Intercompany revolving credit agreement

Iroquois		Iroquois Gas Transmission System L.P.

ISO		Independent system operator

ISO-NE		ISO New England

June 2009 hybrids		2009 Series A Enhanced Junior Subordinated Notes due 2064, subject to extensions to no later than 2079

Kewaunee		Kewaunee nuclear power station

Kincaid		Kincaid power station

kV		Kilovolt

Line TL-404		An approximately 26-mile, 24- and 30- inch gas gathering pipeline that extends from Wetzel County, West Virginia to Monroe County, Ohio

LNG		Liquefied natural gas

Maryland Commission		Public Service Commission of Maryland

MD&A		Management’s Discussion and Analysis of Financial Condition and Results of Operations

MGD		Million gallons a day

Millstone		Millstone nuclear power station

MISO		Midcontinent Independent Transmission System Operator, Inc.

MLP		Master limited partnership

Moody’s		Moody’s Investors Service

MW		Megawatt

MWh		Megawatt hour

Natrium		A natural gas and fractionation facility located in Natrium, West Virginia, owned by Blue Racer

NCEMC		North Carolina Electric Membership Corporation

NedPower		A wind-turbine facility joint venture between Dominion and Shell in Grant County, West Virginia

NGLs		Natural gas liquids

North Anna		North Anna nuclear power station

PAGE 4


Abbreviation or Acronym		Definition
North Carolina Commission		North Carolina Utilities Commission

Northern System		Collection of approximately 131 miles of various diameter natural gas pipelines in Ohio

NO_x		Nitrogen oxide

NPDES		National Pollutant Discharge Elimination System

NRC		Nuclear Regulatory Commission

NSPS		New Source Performance Standards

NYSE		New York Stock Exchange

ODEC		Old Dominion Electric Cooperative

Ohio Commission		Public Utilities Commission of Ohio

Order 1000		Order issued by FERC adopting new requirements for electric transmission planning, cost allocation and development

PIPP		Percentage of Income Payment Plan

PIR		Pipeline Infrastructure Replacement program deployed by East Ohio

PJM		PJM Interconnection, L.L.C.

ppb		Parts-per-billion

PSD		Prevention of Significant Deterioration

RCC		Replacement Capital Covenant

Rider B		A rate adjustment clause associated with the recovery of costs related to the conversion of three of Virginia Power’s coal-fired power stations to biomass

Rider BW		A rate adjustment clause associated with the recovery of costs related to Brunswick County

Rider R		A rate adjustment clause associated with the recovery of costs related to Bear Garden

Rider S		A rate adjustment clause associated with the recovery of costs related to the Virginia City Hybrid Energy Center

Rider T1		A rate adjustment clause to recover the difference between revenues produced from transmission rates included in base rates, and the new total revenue requirement developed annually for the rate years effective September 1

Rider W		A rate adjustment clause associated with the recovery of costs related to Warren County

Riders C1A and C2A		Rate adjustment clauses associated with the recovery of costs related to certain DSM programs approved in DSM cases

ROE		Return on equity

RSN		Remarketable subordinated note

RTO		Regional transmission organization

SEC		Securities and Exchange Commission

Shell		Shell WindEnergy, Inc.

SO₂		Sulfur dioxide

Standard & Poor’s		Standard & Poor’s Ratings Services, a division of McGraw Hill Financial, Inc.

Surry		Surry nuclear power station

U.S.		United States of America

UAO		Unilateral Administrative Order

UEX Rider		Uncollectible Expense Rider deployed by East Ohio

VEBA		Voluntary Employees' Beneficiary Association

VIE		Variable interest entity

Virginia City Hybrid Energy Center		A 600 MW baseload carbon-capture compatible, clean coal powered electric generation facility in Wise County, Virginia

Virginia Commission		Virginia State Corporation Commission

Virginia Power		The legal entity, Virginia Electric and Power Company, one or more of its consolidated subsidiaries or operating segments or the entirety of Virginia Power and its consolidated subsidiaries

Warren County		A 1,329 MW combined-cycle, natural gas-fired power station under construction in Warren County, Virginia

PAGE 5

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

DOMINION RESOURCES, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


	Three Months Ended June 30,					Six Months Ended June 30,
	2014		2013			2014		2013
(millions, except per share amounts)
Operating Revenue	$	2,813	$	2,980		$	6,443	$	6,503

Operating Expenses
Electric fuel and other energy-related purchases		633		875			1,967		1,826
Purchased electric capacity		87		88			175		176
Purchased gas		324		297			864		764
Other operations and maintenance		933		728			1,358		1,351
Depreciation, depletion and amortization		308		303			616		600
Other taxes		134		141			301		308

Total operating expenses		2,419		2,432			5,281		5,025

Income from operations		394		548			1,162		1,478

Other income		57		49			97		136
Interest and related charges		227		203			464		431

Income from continuing operations including noncontrolling interests before income tax expense		224		394			795		1,183
Income tax expense		63		116			249		404

Income from continuing operations including noncontrolling interests		161		278			546		779
Loss from discontinued operations⁽¹⁾		—		(70	)		—		(69	)

Net Income Including Noncontrolling Interests		161		208			546		710
Noncontrolling Interests		2		6			8		13

Net Income Attributable to Dominion	$	159	$	202		$	538	$	697

Amounts Attributable to Dominion:
Income from continuing operations, net of tax	$	159	$	272		$	538	$	766
Loss from discontinued operations, net of tax		—		(70	)		—		(69	)

Net income attributable to Dominion	$	159	$	202		$	538	$	697

Earnings Per Common Share-Basic
Income from continuing operations	$	0.27	$	0.47		$	0.92	$	1.33
Loss from discontinued operations		—		(0.12	)		—		(0.12	)

Net income attributable to Dominion	$	0.27	$	0.35		$	0.92	$	1.21

Earnings Per Common Share-Diluted
Income from continuing operations	$	0.27	$	0.47		$	0.92	$	1.33
Loss from discontinued operations		—		(0.12	)		—		(0.12	)

Net income attributable to Dominion	$	0.27	$	0.35		$	0.92	$	1.21

Dividends declared per common share	$	0.6000	$	0.5625		$	1.2000	$	1.1250

(1)	Includes income tax benefit of $49 million for both the three and six months ended June 30, 2013.

The accompanying notes are an integral part of Dominion’s Consolidated Financial Statements.

PAGE 6

DOMINION RESOURCES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
(millions)
Net income including noncontrolling interests	$	161		$	208		$	546		$	710
Other comprehensive income (loss), net of taxes:
Net deferred gains (losses) on derivatives-hedging activities⁽¹⁾		(59	)		122			(209	)		32
Changes in unrealized net gains on investment securities⁽²⁾		49			3			78			81
Changes in unrecognized pension and other postretirement benefit costs⁽³⁾		4			228			—			228
Amounts reclassified to net income:
Net derivative (gains) losses-hedging activities⁽⁴⁾		(16	)		(17	)		144			59
Net realized gains on investment securities⁽⁵⁾		(7	)		(9	)		(18	)		(36	)
Net pension and other postretirement benefit costs⁽⁶⁾		9			10			17			30
Changes in other comprehensive income (loss) from equity method investees⁽⁷⁾		2			—			(5	)		—

Total other comprehensive income (loss)		(18	)		337			7			394

Comprehensive income including noncontrolling interests		143			545			553			1,104
Comprehensive income attributable to noncontrolling interests		2			6			8			13

Comprehensive income attributable to Dominion	$	141		$	539		$	545		$	1,091

(1)	Net of $47 million and $(76) million tax for the three months ended June 30, 2014 and 2013, respectively, and net of $126 million and $(22) million for the six months ended June 30, 2014 and 2013, respectively.

(2)	Net of $(27) million and $— million tax for the three months ended June 30, 2014 and 2013, respectively, and net of $(28) million and $(51) million for the six months ended June 30, 2014 and 2013, respectively.

(3)	Net of $4 million and $(148) million tax for the three months ended June 30, 2014 and 2013, respectively, and net of $— million and $(148) million for the six months ended June 30, 2014 and 2013, respectively.

(4)	Net of $6 million and $9 million tax for the three months ended June 30, 2014 and 2013, respectively, and net of $(94) million and $(39) million for the six months ended June 30, 2014 and 2013, respectively.

(5)	Net of $4 million and $5 million tax for the three months ended June 30, 2014 and 2013, respectively, and net of $11 million and $23 million for the six months ended June 30, 2014 and 2013, respectively.

(6)	Net of $(6) million and $(11) million tax for the three months ended June 30, 2014 and 2013, respectively, and net of $(12) million and $(20) million for the six months ended June 30, 2014 and 2013, respectively.

(7)	Net of $3 million and $— million tax for the three months ended June 30, 2014 and 2013, respectively, and net of $3 million and $— million for the six months ended June 30, 2014 and 2013, respectively.

The accompanying notes are an integral part of Dominion’s Consolidated Financial Statements.

PAGE 7

DOMINION RESOURCES, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)


	June 30, 2014			December 31, 2013⁽¹⁾
(millions)
ASSETS
Current Assets
Cash and cash equivalents	$	419		$	316
Customer receivables (less allowance for doubtful accounts of $23 and $25)		1,476			1,695
Other receivables (less allowance for doubtful accounts of $3 and $4)		161			141
Inventories		1,261			1,176
Prepayments		224			192
Other		2,020			2,420

Total current assets		5,561			5,940

Investments
Nuclear decommissioning trust funds		4,103			3,903
Investment in equity method affiliates		1,083			916
Other		272			283

Total investments		5,458			5,102

Property, Plant and Equipment
Property, plant and equipment		48,698			46,969
Accumulated depreciation, depletion and amortization		(14,811	)		(14,341	)

Total property, plant and equipment, net		33,887			32,628

Deferred Charges and Other Assets
Goodwill		3,044			3,086
Regulatory assets		1,375			1,228
Other		2,174			2,112

Total deferred charges and other assets		6,593			6,426

Total assets	$	51,499		$	50,096

(1)	Dominion’s Consolidated Balance Sheet at December 31, 2013 has been derived from the audited Consolidated Financial Statements at that date.

The accompanying notes are an integral part of Dominion’s Consolidated Financial Statements.

PAGE 8

DOMINION RESOURCES, INC.

CONSOLIDATED BALANCE SHEETS—(Continued)

(Unaudited)


	June 30, 2014			December 31, 2013⁽¹⁾
(millions)
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Securities due within one year	$	865		$	1,519
Short-term debt		3,080			1,927
Accounts payable		852			1,168
Derivative liabilities		964			828
Other		1,482			1,552

Total current liabilities		7,243			6,994

Long-Term Debt
Long-term debt		18,018			16,877
Junior subordinated notes		1,373			1,373
Remarketable subordinated notes		1,082			1,080

Total long-term debt		20,473			19,330

Deferred Credits and Other Liabilities
Deferred income taxes and investment tax credits		7,237			7,114
Asset retirement obligations		1,515			1,484
Regulatory liabilities		2,011			2,001
Other		1,319			1,274

Total deferred credits and other liabilities		12,082			11,873

Total liabilities		39,798			38,197

Commitments and Contingencies (see Note 15)

Subsidiary Preferred Stock Not Subject to Mandatory Redemption		134			257

Common Shareholders’ Equity
Common stock – no par⁽²⁾		5,861			5,783
Retained earnings		6,023			6,183
Accumulated other comprehensive loss		(317	)		(324	)

Total common shareholders’ equity		11,567			11,642

Total liabilities and shareholders’ equity	$	51,499		$	50,096

(1)	Dominion’s Consolidated Balance Sheet at December 31, 2013 has been derived from the audited Consolidated Financial Statements at that date.

(2)	1 billion shares authorized; 583 million shares and 581 million shares outstanding at June 30, 2014 and December 31, 2013, respectively.

The accompanying notes are an integral part of Dominion’s Consolidated Financial Statements.

PAGE 9

DOMINION RESOURCES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


Six Months Ended June 30,	2014			2013
(millions)
Operating Activities

Net income including noncontrolling interests	$	546		$	710
Adjustments to reconcile net income including noncontrolling interests to net cash provided by operating activities:
Depreciation, depletion and amortization (including nuclear fuel)		748			729
Deferred income taxes and investment tax credits		301			395
Gains on the sale of assets		(159	)		(25	)
Charges associated with North Anna and offshore wind legislation		287			—
Other adjustments		(55	)		(12	)
Changes in:
Accounts receivable		153			92
Inventories		2			(10	)
Deferred fuel and purchased gas costs, net		(322	)		48
Prepayments		(34	)		(88	)
Accounts payable		(258	)		(149	)
Accrued interest, payroll and taxes		(50	)		(67	)
Margin deposit assets and liabilities		204			21
Other operating assets and liabilities		84			147

Net cash provided by operating activities		1,447			1,791

Investing Activities
Plant construction and other property additions (including nuclear fuel)		(2,389	)		(1,937	)
Acquisition of solar development projects		(58	)		(13	)
Proceeds from sales of securities		686			862
Purchases of securities		(703	)		(885	)
Proceeds from the sale of assets to Blue Racer		84			47
Proceeds from the sale of electric retail energy marketing business		187			—
Restricted cash equivalents		8			23
Other		(1	)		18

Net cash used in investing activities		(2,186	)		(1,885	)

Financing Activities
Issuance (repayment) of short-term debt, net		1,152			(307	)
Issuance of long-term debt		1,150			2,350
Repayment of long-term debt, including redemption premiums		(660	)		(1,185	)
Repayment of junior subordinated notes		—			(258	)
Subsidiary preferred stock redemption		(125	)		—
Issuance of common stock		71			144
Common dividend payments		(698	)		(650	)
Subsidiary preferred dividend payments		(6	)		(8	)
Other		(42	)		(50	)

Net cash provided by financing activities		842			36

Increase (decrease) in cash and cash equivalents		103			(58	)
Cash and cash equivalents at beginning of period		316			248

Cash and cash equivalents at end of period	$	419		$	190

Supplemental Cash Flow Information
Significant noncash investing activities:
Accrued capital expenditures	$	309		$	172

The accompanying notes are an integral part of Dominion’s Consolidated Financial Statements.

PAGE 10

VIRGINIA ELECTRIC AND POWER COMPANY

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
(millions)
Operating Revenue⁽¹⁾	$	1,729	$	1,710	$	3,712	$	3,491

Operating Expenses
Electric fuel and other energy-related purchases⁽¹⁾		518		528		1,168		1,098
Purchased electric capacity		87		88		175		176
Other operations and maintenance:
Affiliated suppliers		70		81		141		155
Other		563		274		833		519
Depreciation and amortization		217		211		435		418
Other taxes		69		65		142		132

Total operating expenses		1,524		1,247		2,894		2,498

Income from operations		205		463		818		993

Other income		21		27		36		52
Interest and related charges		103		84		210		177

Income before income tax expense		123		406		644		868
Income tax expense		54		141		251		316

Net Income		69		265		393		552
Preferred dividends		2		4		8		8

Balance available for common stock	$	67	$	261	$	385	$	544

(1)	See Note 17 for amounts attributable to affiliates.

The accompanying notes are an integral part of Virginia Power’s Consolidated Financial Statements.

PAGE 11

VIRGINIA ELECTRIC AND POWER COMPANY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended June 30,					Six Months Ended June 30,
	2014			2013		2014			2013
(millions)
Net income	$	69		$	265	$	393		$	552
Other comprehensive income (loss), net of taxes:
Net deferred gains (losses) on derivatives-hedging activities⁽¹⁾		(1	)		1		1			3
Changes in unrealized net gains on nuclear decommissioning trust funds⁽²⁾		6			—		8			8
Amounts reclassified to net income:
Net derivative gains-hedging activities⁽³⁾		(1	)		—		(4	)		—
Net realized gains on nuclear decommissioning trust funds⁽⁴⁾		—			—		(2	)		(1	)

Other comprehensive income		4			1		3			10

Comprehensive income	$	73		$	266	$	396		$	562

(1)	Net of $— million and $(1) million tax for the three months ended June 30, 2014 and 2013, respectively, and net of $— million and $(2) million for the six months ended June 30, 2014 and 2013, respectively.

(2)	Net of $(3) million and $— million tax for the three months ended June 30, 2014 and 2013, respectively, and net of $(5) million for both the six months ended June 30, 2014 and 2013.

(3)	Net of $— million tax for both the three months ended June 30, 2014 and 2013, and net of $2 million and $— million for the six months ended June 30, 2014 and 2013, respectively.

(4)	Net of $— million tax for both the three months ended June 30, 2014 and 2013, and net of $1 million for both the six months ended June 30, 2014 and 2013.

The accompanying notes are an integral part of Virginia Power’s Consolidated Financial Statements.

PAGE 12

VIRGINIA ELECTRIC AND POWER COMPANY

CONSOLIDATED BALANCE SHEETS

(Unaudited)


	June 30, 2014			December 31, 2013⁽¹⁾
(millions)
ASSETS
Current Assets
Cash and cash equivalents	$	58		$	16
Customer receivables (less allowance for doubtful accounts of $12 and $11)		926			946
Other receivables (less allowance for doubtful accounts of $2 at both dates)		73			78
Inventories (average cost method)		839			808
Prepayments		170			32
Other		279			283

Total current assets		2,345			2,163

Investments
Nuclear decommissioning trust funds		1,857			1,765
Other		4			12

Total investments		1,861			1,777

Property, Plant and Equipment
Property, plant and equipment		33,938			32,848
Accumulated depreciation and amortization		(10,896	)		(10,580	)

Total property, plant and equipment, net		23,042			22,268

Deferred Charges and Other Assets
Intangible assets, net		202			193
Regulatory assets		561			417
Other⁽²⁾		197			143

Total deferred charges and other assets		960			753

Total assets	$	28,208		$	26,961

(1)	Virginia Power’s Consolidated Balance Sheet at December 31, 2013 has been derived from the audited Consolidated Financial Statements at that date.

(2)	See Note 17 for amounts attributable to affiliates.

The accompanying notes are an integral part of Virginia Power’s Consolidated Financial Statements.

PAGE 13

VIRGINIA ELECTRIC AND POWER COMPANY

CONSOLIDATED BALANCE SHEETS—(Continued)

(Unaudited)


	June 30, 2014		December 31, 2013⁽¹⁾
(millions)
LIABILITIES AND SHAREHOLDER’S EQUITY
Current Liabilities
Securities due within one year	$	14	$	58
Short-term debt		1,323		842
Accounts payable		456		479
Payables to affiliates		81		69
Affiliated current borrowings		—		97
Accrued interest, payroll and taxes		224		218
Other⁽²⁾		452		454

Total current liabilities		2,550		2,217

Long-Term Debt		8,716		7,974

Deferred Credits and Other Liabilities
Deferred income taxes and investment tax credits		4,266		4,137
Asset retirement obligations		704		689
Regulatory liabilities		1,607		1,597
Other⁽²⁾		314		292

Total deferred credits and other liabilities		6,891		6,715

Total liabilities		18,157		16,906

Commitments and Contingencies (see Note 15)

Preferred Stock Not Subject to Mandatory Redemption		134		257

Common Shareholder’s Equity
Common stock – no par⁽³⁾		5,738		5,738
Other paid-in capital		1,113		1,113
Retained earnings		3,015		2,899
Accumulated other comprehensive income		51		48

Total common shareholder’s equity		9,917		9,798

Total liabilities and shareholder’s equity	$	28,208	$	26,961

(1)	Virginia Power’s Consolidated Balance Sheet at December 31, 2013 has been derived from the audited Consolidated Financial Statements at that date.

(2)	See Note 17 for amounts attributable to affiliates.

(3)	500,000 shares authorized; 274,723 shares outstanding at June 30, 2014 and December 31, 2013.

The accompanying notes are an integral part of Virginia Power’s Consolidated Financial Statements.

PAGE 14

VIRGINIA ELECTRIC AND POWER COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


Six Months Ended June 30,	2014			2013
(millions)
Operating Activities
Net income	$	393		$	552
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization (including nuclear fuel)		521			499
Deferred income taxes and investment tax credits		246			199
Charges associated with North Anna and offshore wind legislation		287			—
Other adjustments		(17	)		(39	)
Changes in:
Accounts receivable		26			(52	)
Inventories		(31	)		(4	)
Deferred fuel expenses		(359	)		(4	)
Prepayments		(138	)		(47	)
Accounts payable		18			(30	)
Other operating assets and liabilities		(37	)		41

Net cash provided by operating activities		909			1,115

Investing Activities
Plant construction and other property additions		(1,385	)		(1,217	)
Purchases of nuclear fuel		(131	)		(90	)
Proceeds from sales of securities		299			324
Purchases of securities		(311	)		(354	)
Other		(11	)		—

Net cash used in investing activities		(1,539	)		(1,337	)

Financing Activities
Issuance of short-term debt, net		481			92
Repayment of affiliated current borrowings, net		(97	)		(385	)
Issuance of long-term debt		750			1,250
Repayment of long-term debt		(50	)		(459	)
Preferred stock redemption		(125	)		—
Common dividend payments		(270	)		(268	)
Preferred dividend payments		(6	)		(8	)
Other		(11	)		(14	)

Net cash provided by financing activities		672			208

Increase (decrease) in cash and cash equivalents		42			(14	)
Cash and cash equivalents at beginning of period		16			28

Cash and cash equivalents at end of period	$	58		$	14

Supplemental Cash Flow Information
Significant noncash investing activities:
Accrued capital expenditures	$	236		$	100

The accompanying notes are an integral part of Virginia Power’s Consolidated Financial Statements.

PAGE 15

DOMINION GAS HOLDINGS, LLC

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
(millions)
Operating Revenue⁽¹⁾	$	428	$	430	$	997	$	1,016

Operating Expenses
Purchased gas⁽¹⁾		76		63		213		177
Other energy-related purchases		5		18		21		40
Other operations and maintenance:
Affiliated suppliers		16		17		37		39
Other⁽²⁾		93		161		125		269
Depreciation and amortization		49		50		96		99
Other taxes		35		33		86		80

Total operating expenses		274		342		578		704

Income from operations		154		88		419		312

Other income		5		3		13		14
Interest and related charges⁽¹⁾		6		6		12		13

Income from operations before income taxes		153		85		420		313
Income tax expense		60		32		163		122

Net Income	$	93	$	53	$	257	$	191

(1)	See Note 17 for amounts attributable to related parties.

(2)	Includes gains on the sales of assets to an affiliate of $59 million and $25 million for the six months ended June 30, 2014 and 2013, respectively. See Note 10 for more information.

The accompanying notes are an integral part of Dominion Gas’ Consolidated Financial Statements.

PAGE 16

DOMINION GAS HOLDINGS, LLC

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended June 30,					Six Months Ended June 30,
	2014			2013		2014			2013
(millions)
Net income	$	93		$	53	$	257		$	191
Other comprehensive income (loss), net of taxes:
Net deferred gains (losses) on derivatives-hedging activities⁽¹⁾		(19	)		52		(27	)		66
Changes in net unrecognized pension and other postretirement benefit costs⁽²⁾		—			13		(1	)		13
Amounts reclassified to net income:
Net derivative losses-hedging activities⁽³⁾		3			—		8			3
Net pension and other postretirement benefit costs⁽⁴⁾		1			1		3			3

Other comprehensive income (loss)		(15	)		66		(17	)		85

Comprehensive income	$	78		$	119	$	240		$	276

(1)	Net of $12 million and $(33) million tax for the three months ended June 30, 2014 and 2013, respectively, and net of $17 million and $(43) million for the six months ended June 30, 2014 and 2013, respectively.

(2)	Net of $— million and $(9) million tax for the three months ended June 30, 2014 and 2013, respectively, and net of $(1) million and $(9) million for the six months ended June 30, 2014 and 2013, respectively.

(3)	Net of $(2) million and $— million tax for the three months ended June 30, 2014 and 2013, respectively, and net of $(4) million and $(1) million for the six months ended June 30, 2014 and 2013, respectively.

(4)	Net of $— million and $(1) million tax for the three months ended June 30, 2014 and 2013, respectively, and net of $(1) million and $(2) million for the six months ended June 30, 2014 and 2013, respectively.

The accompanying notes are an integral part of Dominion Gas’ Consolidated Financial Statements.

PAGE 17

DOMINION GAS HOLDINGS, LLC

CONSOLIDATED BALANCE SHEETS

(Unaudited)


	June 30, 2014			December 31, 2013⁽¹⁾
(millions)
ASSETS
Current Assets
Cash and cash equivalents	$	10		$	8
Customer receivables (less allowance for doubtful accounts of $4 and $5)⁽²⁾		293			311
Affiliated receivables		6			41
Inventories		81			63
Prepayments		46			67
Other⁽²⁾		235			311

Total current assets		671			801

Investments		114			106

Property, Plant and Equipment
Property, plant and equipment		8,426			8,240
Accumulated depreciation and amortization		(2,476	)		(2,421	)

Total property, plant and equipment, net		5,950			5,819

Deferred Charges and Other Assets
Goodwill		542			545
Intangible assets, net		80			82
Regulatory assets		304			285
Pension and other postretirement benefit assets⁽²⁾		1,493			1,436
Other⁽²⁾		66			68

Total deferred charges and other assets		2,485			2,416

Total assets	$	9,220		$	9,142

(1)	Dominion Gas’ Consolidated Balance Sheet at December 31, 2013 has been derived from the Audited Consolidated Financial Statements at that date.

(2)	See Note 17 for amounts attributable to related parties.

The accompanying notes are an integral part of Dominion Gas’ Consolidated Financial Statements.

PAGE 18

DOMINION GAS HOLDINGS, LLC

CONSOLIDATED BALANCE SHEETS—(Continued)

(Unaudited)


	June 30, 2014			December 31, 2013⁽¹⁾
(millions)
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	126		$	277
Payables to affiliates		13			45
Affiliated current borrowings		1,471			1,342
Accrued interest, payroll and taxes		187			209
Other⁽²⁾		211			197

Total current liabilities		2,008			2,070

Long-Term Debt		1,199			1,198

Deferred Credits and Other Liabilities
Deferred income taxes and investment tax credits		2,003			1,977
Other⁽²⁾		483			470

Total deferred credits and other liabilities		2,486			2,447

Total liabilities		5,693			5,715

Commitments and Contingencies (see Note 15)

Equity
Membership interests		3,602			3,485
Accumulated other comprehensive loss		(75	)		(58	)

Total equity		3,527			3,427

Total liabilities and equity	$	9,220		$	9,142

(1)	Dominion Gas’ Consolidated Balance Sheet at December 31, 2013 has been derived from the Audited Consolidated Financial Statements at that date.

(2)	See Note 17 for amounts attributable to related parties.

The accompanying notes are an integral part of Dominion Gas’ Consolidated Financial Statements.

PAGE 19

DOMINION GAS HOLDINGS, LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


Six Months Ended June 30,	2014			2013
(millions)
Operating Activities
Net income	$	257		$	191
Adjustments to reconcile net income to net cash provided by operating activities:
Gains on sales of assets to an affiliate		(59	)		(25	)
Depreciation and amortization		96			99
Deferred income taxes and investment tax credits		48			47
Other adjustments		(7	)		(8	)
Changes in:
Accounts receivable		12			75
Deferred purchased gas costs, net		40			47
Prepayments		21			28
Inventories		(18	)		(7	)
Accounts payable		(152	)		(96	)
Payables to affiliates		(32	)		(10	)
Accrued interest, payroll and taxes		(22	)		(21	)
Other operating assets and liabilities		(23	)		(22	)

Net cash provided by operating activities		161			298

Investing Activities
Plant construction and other property additions		(249	)		(253	)
Proceeds from sale of assets to an affiliate		47			108
Other		(6	)		1

Net cash used in investing activities		(208	)		(144	)

Financing Activities
Issuance (repayment) of affiliated current borrowings, net		196			(150	)
Distribution payments		(145	)		—
Other		(2	)		—

Net cash provided by (used in) financing activities		49			(150	)

Increase in cash and cash equivalents		2			4
Cash and cash equivalents at beginning of period		8			12

Cash and cash equivalents at end of period	$	10		$	16

Supplemental Cash Flow Information
Significant noncash investing and financing activities:
Accrued capital expenditures	$	40		$	38
Extinguishment of affiliated current borrowings in exchange for assets sold to affiliate		67			—

The accompanying notes are an integral part of Dominion Gas’ Consolidated Financial Statements.

PAGE 20

COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Nature of Operations

Dominion, headquartered in Richmond, Virginia, is one of the nation’s largest producers and transporters of energy. Dominion’s operations are conducted through various subsidiaries, including Virginia Power and Dominion Gas. Virginia Power is a regulated public utility that generates, transmits and distributes electricity for sale in Virginia and northeastern North Carolina. Dominion Gas is a holding company that conducts business activities through a regulated interstate natural gas transmission pipeline and underground storage system in the Northeast, mid-Atlantic and Midwest states, regulated gas transportation and distribution operations in Ohio, and gas gathering and processing activities primarily in West Virginia, Ohio and Pennsylvania. Dominion Gas' wholly-owned subsidiaries are DTI, East Ohio and Dominion Iroquois.

Note 2. Significant Accounting Policies

As permitted by the rules and regulations of the SEC, the Companies’ accompanying unaudited Consolidated Financial Statements contain certain condensed financial information and exclude certain footnote disclosures normally included in annual audited consolidated financial statements prepared in accordance with GAAP. These unaudited Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and Notes in Dominion’s and Virginia Power’s Annual Report on Form 10-K for the year ended December 31, 2013, Dominion’s and Virginia Power’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014 and Exhibits 99.11(b) and 99.11(c) to Dominion Gas’ Current Report on Form 8-K dated June 26, 2014.

In the Companies’ opinion, the accompanying unaudited Consolidated Financial Statements contain all adjustments necessary to present fairly their financial position as of June 30, 2014, their results of operations for the three and six months ended June 30, 2014 and 2013, and their cash flows for the six months ended June 30, 2014 and 2013. Such adjustments are normal and recurring in nature unless otherwise noted.

The Companies make certain estimates and assumptions in preparing their Consolidated Financial Statements in accordance with GAAP. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses for the periods presented. Actual results may differ from those estimates.

The Companies’ accompanying unaudited Consolidated Financial Statements include, after eliminating intercompany transactions and balances, their accounts and those of their respective majority-owned subsidiaries and those VIEs where Dominion has been determined to be the primary beneficiary.

The results of operations for interim periods are not necessarily indicative of the results expected for the full year. Information for quarterly periods is affected by seasonal variations in sales, rate changes, electric fuel and other energy-related purchases, purchased gas expenses and other factors.

Certain amounts in the Companies' 2013 Consolidated Financial Statements and Notes have been reclassified to conform to the 2014 presentation for comparative purposes. The reclassifications did not affect the Companies’ net income, total assets, liabilities, equity or cash flows.

Amounts disclosed for Dominion are inclusive of Virginia Power and/or Dominion Gas, where applicable.

Note 3. Acquisitions and Dispositions

Dominion

Acquisition of Solar Development Projects

In March 2014, Dominion completed the acquisition of 100% of the equity interests of six solar development projects in California from Recurrent Energy Development Holdings, LLC for approximately $50 million. The projects are expected to cost approximately $450 million once constructed, including the initial acquisition cost. Upon completion, the facilities are expected to generate approximately 139 MW and will provide Dominion with a large utility-scale solar presence in the California market and significantly increase its solar generation portfolio.

In May 2014, Dominion completed the acquisition of 100% of the equity interests of two solar development projects in Tennessee from Strata Solar Development, LLC for $2 million. The projects are expected to cost approximately $70 million once constructed, including the initial acquisition cost. Upon completion, the facilities are expected to generate approximately 32 MW.

PAGE 21

The purchase price for each of these acquisitions was allocated to Property, Plant and Equipment.

In May 2014, Dominion entered into an agreement to acquire 100% of the equity interests of a solar project in California from EDF Renewable Development, Inc. for approximately $70 million. The acquisition is expected to close later this year prior to the project commencing operations. The project is expected to cost approximately $75 million once constructed, including the initial acquisition cost. Upon completion, the facilities are expected to generate approximately 20 MW.

Long-term power purchase, interconnection, EPC and operation and maintenance agreements have been executed for each of the acquired projects. Construction of the projects has commenced and all of the solar facilities are expected to enter commercial operations in late 2014. Dominion expects to claim federal investment tax credits on the projects.

Sale of Electric Retail Energy Marketing Business

In March 2014, Dominion completed the sale of its electric retail energy marketing business. The proceeds were approximately $187 million, net of transaction costs. The sale resulted in a gain, subject to post-closing adjustments, of approximately $100 million ($57 million after-tax) net of a $31 million write-off of goodwill, and is included in other operations and maintenance expense in Dominion's Consolidated Statements of Income. The sale of the electric retail energy marketing business did not qualify for discontinued operations classification.

Sale of Illinois Gas Contracts

In June 2013, Dominion completed the sale of Illinois Gas Contracts. The sales price was approximately $32 million, subject to post-closing adjustments. The sale resulted in a gain of approximately $29 million ($18 million after-tax) net of a $3 million write-off of goodwill, and is included in other operations and maintenance expense in Dominion’s Consolidated Statements of Income. The sale of Illinois Gas Contracts did not qualify for discontinued operations classification.

Sale of Brayton Point, Kincaid and Equity Method Investment in Elwood

In March 2013, Dominion entered into an agreement with Energy Capital Partners to sell Brayton Point, Kincaid, and its equity method investment in Elwood. In August 2013, Dominion completed the sale and received proceeds of approximately $465 million, net of transaction costs.

In the first and second quarters of 2013, Brayton Point’s and Kincaid’s assets and liabilities to be disposed of were classified as held for sale and adjusted to their estimated fair value less cost to sell, resulting in impairment charges totaling $48 million ($28 million after-tax) for the six month period ended June 30, 2013, including $11 million ($6 million after-tax) for the three month period ended June 30, 2013, which are included in discontinued operations in Dominion’s Consolidated Statements of Income. Dominion used the market approach to estimate the fair value of Brayton Point’s and Kincaid’s long-lived assets. These were considered Level 2 fair value measurements given that they were based on the agreed-upon sales price.

Dominion's 50% interest in Elwood was an equity method investment and therefore, in accordance with applicable accounting guidance, the carrying amount of this investment was not classified as held for sale nor were the equity earnings from this investment reported as discontinued operations.

The following table presents selected information regarding the results of operations of Brayton Point and Kincaid, which are reported as discontinued operations in Dominion’s Consolidated Statements of Income:


	Three Months Ended June 30,			Six Months Ended June 30,
	2013			2013
(millions)
Operating revenue	$	63		$	217
Income before income taxes⁽¹⁾		(119	)		(118	)

(1)	Includes $64 million of charges related to the defeasance of Brayton Point debt and the early redemption of Kincaid debt. See Note 17 in Dominion's Annual Report on Form 10-K for the year ended December 31, 2013 for more information.

Dominion Gas

Assignment of Marcellus Acreage

In December 2013, DTI closed on agreements with two natural gas producers to convey approximately 100,000 acres of Marcellus Shale development rights underneath several of its natural gas storage fields. The agreements provide for payments to DTI, subject to customary adjustments, of approximately $200 million over a period of nine years, and an overriding royalty

PAGE 22

interest in gas produced from the acreage. During the six months ended June 30, 2014, DTI received $16 million in additional cash proceeds resulting from post-closing adjustments. At June 30, 2014, deferred revenue totaled approximately $91 million, which is expected to be recognized over a period of approximately nine years.

Dominion and Dominion Gas

Blue Racer

See Note 10 for a discussion of transactions related to Blue Racer.

Note 4. Operating Revenue

The Companies’ operating revenue consists of the following:


	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
(millions)
Dominion
Electric sales:
Regulated	$	1,697	$	1,687	$	3,648	$	3,448
Nonregulated		320		545		1,174		1,203
Gas sales:
Regulated		70		49		217		181
Nonregulated		228		208		345		553
Gas transportation and storage		351		360		795		827
Other		147		131		264		291

Total operating revenue	$	2,813	$	2,980	$	6,443	$	6,503

Virginia Power
Regulated electric sales	$	1,697	$	1,687	$	3,648	$	3,448
Other		32		23		64		43

Total operating revenue	$	1,729	$	1,710	$	3,712	$	3,491

Dominion Gas
Gas sales:
Regulated	$	54	$	34	$	137	$	108
Nonregulated		4		4		13		7
Gas transportation and storage		304		312		700		731
NGL revenue		44		66		101		138
Other		22		14		46		32

Total operating revenue	$	428	$	430	$	997	$	1,016

Note 5. Income Taxes

For continuing operations, including noncontrolling interests, the statutory U.S. federal income tax rate reconciles to the Companies' effective income tax rate as follows:


	Dominion						Virginia Power						Dominion Gas
Six Months Ended June 30,	2014			2013			2014			2013			2014			2013
U.S. statutory rate		35.0	%		35.0	%		35.0	%		35.0	%		35.0	%		35.0	%
Increases (reductions) resulting from:
State taxes, net of federal benefit		1.5			1.9			3.8			2.6			3.7			3.8
Investment and production tax credits		(5.9	)		(1.5	)		(0.6	)		—			—			—
Valuation allowances		1.1			—			—			—			—			—
Other, net		(0.4	)		(1.3	)		0.6			(1.2	)		0.1			0.2

Effective tax rate		31.3	%		34.1	%		38.8	%		36.4	%		38.8	%		39.0	%

PAGE 23

In 2014, there have been no material changes in the Companies’ unrecognized tax benefits or expectations regarding possible changes that could reasonably occur during the next twelve months. See Note 5 to the Consolidated Financial Statements in Dominion’s and Virginia Power’s Annual Report on Form 10-K for the year ended December 31, 2013 and Note 5 in Exhibit 99.11(b) to Dominion Gas’ Current Report on Form 8-K dated June 26, 2014 for a discussion of these unrecognized tax benefits.

Note 6. Earnings Per Share

The following table presents the calculation of Dominion’s basic and diluted EPS:


	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
(millions, except EPS)
Net income attributable to Dominion	$	159	$	202	$	538	$	697

Average shares of common stock outstanding – Basic		581.9		578.1		581.7		577.3
Net effect of dilutive securities⁽¹⁾		2.0		0.8		1.7		0.9
Average shares of common stock outstanding – Diluted		583.9		578.9		583.4		578.2

Earnings Per Common Share – Basic	$	0.27	$	0.35	$	0.92	$	1.21
Earnings Per Common Share – Diluted	$	0.27	$	0.35	$	0.92	$	1.21

(1)

Dilutive securities consist primarily of contingently convertible senior notes and the 2013 Equity Units for 2014 and contingently convertible senior notes for 2013. See Note 14 in this report and Note 17 to the Consolidated Financial Statements in Dominion’s and Virginia Power’s Annual Report on Form 10-K for the year ended December 31, 2013 for more information.

There were no potentially dilutive securities excluded from the calculation of diluted EPS for the three and six months ended June 30, 2014. The 2013 Equity Units are potentially dilutive securities but were excluded from the calculation of diluted EPS for the three and six months ended June 30, 2013. See Note 17 to the Consolidated Financial Statements in Dominion's and Virginia Power’s Annual Report on Form 10-K for the year ended December 31, 2013 for more information.

PAGE 24

Note 7. Accumulated Other Comprehensive Income

Dominion

The following table presents Dominion’s changes in AOCI by component, net of tax:


	Deferred gains and losses on derivatives- hedging activities			Unrealized gains and losses on investment securities			Unrecognized pension and other postretirement benefit costs			Other comprehensive income (loss) from equity method investee			Total
(millions)
Three Months Ended June 30, 2014
Beginning balance	$	(278	)	$	492		$	(506	)	$	(7	)	$	(299	)
Other comprehensive income before reclassifications: gains (losses)		(59	)		49			4			2			(4	)
Amounts reclassified from accumulated other comprehensive income⁽¹⁾: (gains) losses		(16	)		(7	)		9			—			(14	)

Net current-period other comprehensive income (loss)		(75	)		42			13			2			(18	)

Ending balance	$	(353	)	$	534		$	(493	)	$	(5	)	$	(317	)

Three Months Ended June 30, 2013
Beginning balance	$	(136	)	$	377		$	(1,061	)	$	—		$	(820	)
Other comprehensive income before reclassifications: gains (losses)		122			3			228			—			353
Amounts reclassified from accumulated other comprehensive income⁽¹⁾: (gains) losses		(17	)		(9	)		10			—			(16	)

Net current-period other comprehensive income (loss)		105			(6	)		238			—			337

Ending balance	$	(31	)	$	371		$	(823	)	$	—		$	(483	)

Six Months Ended June 30, 2014
Beginning balance	$	(288	)	$	474		$	(510	)	$	—		$	(324	)
Other comprehensive income before reclassifications: gains (losses)		(209	)		78			—			(5	)		(136	)
Amounts reclassified from accumulated other comprehensive income⁽¹⁾: (gains) losses		144			(18	)		17			—			143

Net current-period other comprehensive income (loss)		(65	)		60			17			(5	)		7

Ending balance	$	(353	)	$	534		$	(493	)	$	(5	)	$	(317	)

Six Months Ended June 30, 2013
Beginning balance	$	(122	)	$	326		$	(1,081	)	$	—		$	(877	)
Other comprehensive income before reclassifications: gains (losses)		32			81			228			—			341
Amounts reclassified from accumulated other comprehensive income⁽¹⁾: (gains) losses		59			(36	)		30			—			53

Net current-period other comprehensive income (loss)		91			45			258			—			394

Ending balance	$	(31	)	$	371		$	(823	)	$	—		$	(483	)

(1)	See table below for details about these reclassifications.

PAGE 25

The following table presents Dominion’s reclassifications out of AOCI by component:


Details about AOCI components	Amounts reclassified from AOCI			Affected line item in the Consolidated Statements of Income
(millions)
Three Months Ended June 30, 2014
Deferred (gains) and losses on derivatives-hedging activities:
Commodity contracts	$	(28	)	Operating revenue
		3		Purchased gas
Interest rate contracts		3		Interest and related charges

		(22	)
Tax		6		Income tax expense

	$	(16	)

Unrealized (gains) and losses on investment securities:
Realized (gain) loss on sale of securities	$	(13	)	Other income
Impairment		2		Other income

		(11	)
Tax		4		Income tax expense

	$	(7	)

Unrecognized pension and other postretirement benefit costs:
Prior service (credit) costs	$	(2	)	Other operations and maintenance
Actuarial (gains) losses		17		Other operations and maintenance

		15
Tax		(6	)	Income tax expense

	$	9

Three Months Ended June 30, 2013
Deferred (gains) and losses on derivatives-hedging activities:
Commodity contracts	$	(29	)	Operating revenue
Interest rate contracts		3		Interest and related charges

		(26	)
Tax		9		Income tax expense

	$	(17	)

Unrealized (gains) and losses on investment securities:
Realized (gain) loss on sale of securities	$	(17	)	Other income
Impairment		3		Other income

		(14	)
Tax		5		Income tax expense

	$	(9	)

Unrecognized pension and other postretirement benefit costs:
Prior service (credit) costs	$	(6	)
Actuarial (gains) losses		27		Other operations and maintenance

		21
Tax		(11	)	Income tax expense

	$	10

Six Months Ended June 30, 2014
Deferred (gains) and losses on derivatives-hedging activities:
Commodity contracts	$	241		Operating revenue
		4		Purchased gas
		(13	)	Electric fuel and other energy-related purchases
Interest rate contracts		6		Interest and related charges

		238
Tax		(94	)	Income tax expense

	$	144

PAGE 26


Unrealized (gains) and losses on investment securities:
Realized (gain) loss on sale of securities	$	(33	)	Other income
Impairment		4		Other income

		(29	)
Tax		11		Income tax expense

	$	(18	)

Unrecognized pension and other postretirement benefit costs:
Prior service (credit) costs	$	(5	)	Other operations and maintenance
Actuarial (gains) losses		34		Other operations and maintenance

		29
Tax		(12	)	Income tax expense

	$	17

Six Months Ended June 30, 2013
Deferred (gains) and losses on derivatives-hedging activities:
Commodity contracts	$	55		Operating revenue
		34		Purchased gas
		3		Electric fuel and other energy-related purchases
Interest rate contracts		6		Interest and related charges

		98
Tax		(39	)	Income tax expense

	$	59

Unrealized (gains) and losses on investment securities:
Realized (gain) loss on sale of securities	$	(64	)	Other income
Impairment		5		Other income

		(59	)
Tax		23		Income tax expense

	$	(36	)

Unrecognized pension and other postretirement benefit costs:
Prior service (credit) costs	$	(6	)
Actuarial (gains) losses		56		Other operations and maintenance

		50
Tax		(20	)	Income tax expense

	$	30

PAGE 27

Dominion Gas

The following table presents Dominion Gas’ changes in AOCI by component, net of tax:


	Deferred gains and losses on derivatives- hedging activities			Unrecognized pension and other postretirement benefit costs			Total
(millions)
Three Months Ended June 30, 2014
Beginning balance	$	—		$	(60	)	$	(60	)
Other comprehensive income before reclassifications: gains (losses)		(19	)		—			(19	)
Amounts reclassified from accumulated other comprehensive income: (gains) losses⁽¹⁾		3			1			4

Net current-period other comprehensive income (loss)		(16	)		1			(15	)

Ending balance	$	(16	)	$	(59	)	$	(75	)

Three Months Ended June 30, 2013
Beginning balance	$	(30	)	$	(91	)	$	(121	)
Other comprehensive income before reclassifications: gains (losses)		52			13			65
Amounts reclassified from accumulated other comprehensive income: (gains) losses⁽¹⁾		—			1			1

Net current-period other comprehensive income		52			14			66

Ending balance	$	22		$	(77	)	$	(55	)

Six Months Ended June 30, 2014
Beginning balance	$	3		$	(61	)	$	(58	)
Other comprehensive income before reclassifications: gains (losses)		(27	)		(1	)		(28	)
Amounts reclassified from accumulated other comprehensive income: (gains) losses⁽¹⁾		8			3			11

Net current-period other comprehensive income (loss)		(19	)		2			(17	)

Ending balance	$	(16	)	$	(59	)	$	(75	)

Six Months Ended June 30, 2013
Beginning balance	$	(47	)	$	(93	)	$	(140	)
Other comprehensive income before reclassifications: gains (losses)		66			13			79
Amounts reclassified from accumulated other comprehensive income: (gains) losses⁽¹⁾		3			3			6

Net current-period other comprehensive income		69			16			85

Ending balance	$	22		$	(77	)	$	(55	)

(1)	See table below for details about these reclassifications.

PAGE 28

The following table presents Dominion Gas' reclassifications out of AOCI by component:


Details about AOCI components	Amounts reclassified from AOCI			Affected line item in the Consolidated Statements of Income
(millions)
Three Months Ended June 30, 2014
Deferred (gains) and losses on derivatives-hedging activities:
Commodity contracts	$	2		Operating revenue
		3		Purchased gas

		5
Tax		(2	)	Income tax expense

	$	3

Unrecognized pension and other postretirement benefit costs:
Actuarial (gains) losses	$	1		Other operations and maintenance

		1
Tax		—		Income tax expense

	$	1

Three Months Ended June 30, 2013
Deferred (gains) and losses on derivatives-hedging activities:
Commodity contracts	$	(3	)	Operating revenue
		3		Purchased gas

		—
Tax		—		Income tax expense

	$	—

Unrecognized pension and other postretirement benefit costs:
Actuarial (gains) losses	$	2		Other operations and maintenance

		2
Tax		(1	)	Income tax expense

	$	1

Six Months Ended June 30, 2014
Deferred (gains) and losses on derivatives-hedging activities:
Commodity contracts	$	7		Operating revenue
		5		Purchased gas

		12
Tax		(4	)	Income tax expense

	$	8

Unrecognized pension and other postretirement benefit costs:
Actuarial (gains) losses	$	4		Other operations and maintenance

		4
Tax		(1	)	Income tax expense

	$	3

Six Months Ended June 30, 2013
Deferred (gains) and losses on derivatives-hedging activities:
Commodity contracts	$	(2	)	Operating revenue
		6		Purchased gas

		4
Tax		(1	)	Income tax expense

	$	3

Unrecognized pension and other postretirement benefit costs:
Actuarial (gains) losses	$	5		Other operations and maintenance

		5
Tax		(2	)	Income tax expense

	$	3

Note 8. Fair Value Measurements

The Companies' fair value measurements are made in accordance with the policies discussed in Note 6 to the Consolidated Financial Statements in Dominion's and Virginia Power’s Annual Report on Form 10-K for the year ended December 31, 2013 and Note 6 in Exhibit 99.11(b) to Dominion Gas’ Current Report on Form 8-K dated June 26, 2014. See Note 9 in this report for further information about their derivatives and hedge accounting activities.

The Companies enter into certain physical and financial forwards, futures, options and swaps, which are considered Level 3 as they have one or more inputs that are not observable and are significant to the valuation. The discounted cash flow method is used to value Level 3 physical and financial forwards and futures contracts. An option model is used to value Level 3 physical and financial options. The discounted cash flow model for forwards and futures calculates mark-to-market valuations based on

PAGE 29

forward market prices, original transaction prices, volumes, risk-free rate of return, and credit spreads. The option model calculates mark-to-market valuations using variations of the Black-Scholes option model. The inputs into the models are the forward market prices, implied price volatilities, risk-free rate of return, the option expiration dates, the option strike prices, the original sales prices, and volumes. For Level 3 fair value measurements, forward market prices and implied price volatilities are considered unobservable. The unobservable inputs are developed and substantiated using historical information, available market data, third-party data, and statistical analysis. Periodically, inputs to valuation models are reviewed and revised as needed, based on historical information, updated market data, market liquidity and relationships, and changes in third-party pricing sources.

The following table presents the Companies' quantitative information about Level 3 fair value measurements at June 30, 2014. The range and weighted average are presented in dollars for market price inputs and percentages for price volatility.


	Fair Value (millions)		Valuation Techniques	Unobservable Input			Range	Weighted Average⁽¹⁾

Assets:
Physical and Financial Forwards and Futures:
Natural Gas⁽²⁾	$	19	Discounted Cash Flow		Market Price (per Dth)⁽⁵⁾		(2) - 5		2
FTRs⁽³⁾		10	Discounted Cash Flow		Market Price (per MWh)⁽⁵⁾		(1) - 10		1
NGLs ⁽⁴⁾		3	Discounted Cash Flow		Market Price (per Gal)⁽⁵⁾		1 - 3		1
Physical and Financial Options:
Natural Gas		4	Option Model		Market Price (per Dth)⁽⁵⁾		3 - 5		4
					Price Volatility	⁽⁶⁾	14% - 32%		24	%

Total assets	$	36

Liabilities:
Physical and Financial Forwards and Futures:
Natural Gas⁽²⁾	$	20	Discounted Cash Flow		Market Price (per Dth)⁽⁵⁾		(2) - 5		2
FTRs⁽³⁾		3	Discounted Cash Flow		Market Price (per MWh)⁽⁵⁾		(10) - 10		1
NGLs⁽⁴⁾		6	Discounted Cash Flow		Market Price (per Gal)⁽⁵⁾		1 - 3		1
Physical and Financial Options:
Natural Gas		4	Option Model		Market Price (per Dth)⁽⁵⁾		2 - 5		4
					Price Volatility⁽⁶⁾		14% - 32%		25	%

Total liabilities	$	33

(1)	Averages weighted by volume.

(2)	Includes basis.

(3)	Information represents Virginia Power’s quantitative information about Level 3 fair value measurements.

(4)	Information represents Dominion Gas’ quantitative information about Level 3 fair value measurements.

(5)	Represents market prices beyond defined terms for Levels 1 & 2.

(6)	Represents volatilities unrepresented in published markets.

Sensitivity of the fair value measurements to changes in the significant unobservable inputs is as follows:


Significant Unobservable Inputs	Position	Change to Input	Impact on Fair Value Measurement
Market Price	Buy	Increase (decrease)	Gain (loss)
Market Price	Sell	Increase (decrease)	Loss (gain)
Price Volatility	Buy	Increase (decrease)	Gain (loss)
Price Volatility	Sell	Increase (decrease)	Loss (gain)

PAGE 30

Non-recurring Fair Value Measurements

Dominion

See Note 3 for non-recurring fair value measurements related to Brayton Point and Kincaid.

Dominion Gas

In June 2013, Dominion Gas purchased certain natural gas infrastructure facilities that were previously leased from third parties. The purchase price was based on terms in the lease, which exceeded current market pricing. As a result of the purchase price and expected losses, Dominion Gas recorded an impairment charge of $49 million ($29 million after-tax) in other operations and maintenance expense in its Consolidated Statements of Income, to write down the long-lived assets to their estimated fair values of less than $1 million. As management was not aware of any recent market transactions for comparable assets with sufficient transparency to develop a market approach to fair value, Dominion Gas used the income approach (discounted cash flows) to estimate the fair value of the assets in this impairment test. This was considered a Level 3 fair value measurement due to the use of significant unobservable inputs, including estimates of future production and other commodity prices.

Also in June 2013, Dominion Gas recorded an impairment charge of $6 million ($4 million after-tax) in other operations and maintenance expense in its Consolidated Statements of Income, to write off previously capitalized costs following the cancellation of two development projects.

PAGE 31

Recurring Fair Value Measurements

Dominion

The following table presents Dominion’s assets and liabilities that are measured at fair value on a recurring basis for each hierarchy level, including both current and noncurrent portions:


	Level 1		Level 2		Level 3		Total
(millions)
At June 30, 2014
Assets:
Derivatives:
Commodity	$	1	$	645	$	36	$	682
Interest rate		—		57		—		57
Investments⁽¹⁾:
Equity securities:
U.S.:
Large cap		2,592		—		—		2,592
Other		6		—		—		6
Non-U.S.:
Large cap		12		—		—		12
Fixed income:
Corporate debt instruments		—		409		—		409
U.S. Treasury securities and agency debentures		446		182		—		628
State and municipal		—		368		—		368
Other		—		7		—		7
Cash equivalents and other		1		91		—		92

Total assets	$	3,058	$	1,759	$	36	$	4,853

Liabilities:
Derivatives:
Commodity	$	1	$	1,113	$	33	$	1,147
Interest rate		—		109		—		109

Total liabilities	$	1	$	1,222	$	33	$	1,256

At December 31, 2013
Assets:
Derivatives:
Commodity	$	3	$	718	$	32	$	753
Interest rate		—		137		—		137
Investments⁽¹⁾:
Equity securities:
U.S.:
Large cap		2,417		—		—		2,417
Other		79		—		—		79
Non-U.S.:
Large cap		13		—		—		13
Fixed income:
Corporate debt instruments		—		345		—		345
U.S. Treasury securities and agency debentures		415		175		—		590
State and municipal		—		343		—		343
Other		—		3		—		3
Cash equivalents and other		—		103		—		103
Restricted cash equivalents		—		8		—		8

Total assets	$	2,927	$	1,832	$	32	$	4,791

Liabilities:
Derivatives:
Commodity	$	3	$	1,051	$	48	$	1,102

Total liabilities	$	3	$	1,051	$	48	$	1,102

(1)	Includes investments held in the nuclear decommissioning and rabbi trusts.

PAGE 32

The following table presents the net change in Dominion's assets and liabilities measured at fair value on a recurring basis and included in the Level 3 fair value category:


	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
(millions)
Beginning balance	$	8		$	9		$	(16	)	$	25
Total realized and unrealized gains (losses):
Included in earnings		(10	)		(10	)		100			2
Included in other comprehensive income (loss)		(1	)		26			3			36
Included in regulatory assets/liabilities		(3	)		(22	)		14			(27	)
Settlements		9			(1	)		(99	)		(26	)
Transfers out of Level 3		—			—			1			(8	)

Ending balance	$	3		$	2		$	3		$	2

The amount of gains (losses) for the period included in earnings attributable to the change in unrealized gains (losses) relating to assets/liabilities still held at the reporting date	$	—		$	(4	)	$	1		$	(11	)

PAGE 33

The following table presents Dominion’s classification of gains and losses included in earnings in the Level 3 fair value category:


	Operating revenue			Purchased Gas			Electric fuel and other energy- related purchases			Total
(millions)
Three Months Ended June 30, 2014
Total gains (losses) included in earnings	$	(1	)	$	(1	)	$	(8	)	$	(10	)

The amount of total gains (losses) for the period included in earnings attributable to the change in unrealized gains (losses) relating to assets/liabilities still held at the reporting date		1			(1	)		—			—

Three Months Ended June 30, 2013
Total gains (losses) included in earnings	$	(2	)	$	—		$	(8	)	$	(10	)

The amount of total gains (losses) for the period included in earnings attributable to the change in unrealized gains (losses) relating to assets/liabilities still held at the reporting date		(2	)		—			(2	)		(4	)

Six Months Ended June 30, 2014
Total gains (losses) included in earnings	$	(11	)	$	(1	)	$	112		$	100

The amount of total gains (losses) for the period included in earnings attributable to the change in unrealized gains (losses) relating to assets/liabilities still held at the reporting date		2			(1	)		—			1

Six Months Ended June 30, 2013
Total gains (losses) included in earnings	$	7		$	—		$	(5	)	$	2

The amount of total gains (losses) for the period included in earnings attributable to the change in unrealized gains (losses) relating to assets/liabilities still held at the reporting date		(10	)		—			(1	)		(11	)

PAGE 34

Virginia Power

The following table presents Virginia Power’s assets and liabilities that are measured at fair value on a recurring basis for each hierarchy level, including both current and noncurrent portions:


	Level 1		Level 2		Level 3		Total
(millions)
At June 30, 2014
Assets:
Derivatives:
Commodity	$	—	$	5	$	10	$	15
Investments⁽¹⁾:
Equity securities:
U.S. Large cap		1,098		—		—		1,098
Fixed income:
Corporate debt instruments		—		221		—		221
U.S. Treasury securities and agency debentures		169		59		—		228
State and municipal		—		185		—		185
Cash equivalents and other		—		28		—		28

Total assets	$	1,267	$	498	$	10	$	1,775

Liabilities:
Derivatives:
Commodity	$	—	$	5	$	3	$	8
Interest rate		—		15		—		15

Total liabilities	$	—	$	20	$	3	$	23

At December 31, 2013
Assets:
Derivatives:
Commodity	$	—	$	3	$	2	$	5
Interest rate		—		48		—		48
Investments⁽¹⁾:
Equity securities:
U.S.:
Large cap		1,021		—		—		1,021
Other		36		—		—		36
Fixed income:
Corporate debt instruments		—		191		—		191
U.S. Treasury securities and agency debentures		146		66		—		212
State and municipal		—		164		—		164
Cash equivalents and other		—		31		—		31
Restricted cash equivalents		—		8		—		8

Total assets	$	1,203	$	511	$	2	$	1,716

Liabilities:
Derivatives:
Commodity	$	—	$	3	$	9	$	12

Total liabilities	$	—	$	3	$	9	$	12

(1)	Includes investments held in the nuclear decommissioning and rabbi trusts.

PAGE 35

The following table presents the net change in Virginia Power’s assets and liabilities measured at fair value on a recurring basis and included in the Level 3 fair value category:


	Three Months Ended June 30,						Six Months Ended June 30,
(millions)	2014			2013			2014			2013
Beginning balance	$	10		$	(3	)	$	(7	)	$	2
Total realized and unrealized gains (losses):
Included in earnings		(9	)		(7	)		111			(4	)
Included in regulatory assets/liabilities		(3	)		(22	)		14			(27	)
Settlements		9			7			(111	)		4

Ending balance	$	7		$	(25	)	$	7		$	(25	)

The gains and losses included in earnings in the Level 3 fair value category were classified in electric fuel and other energy-related purchases in Virginia Power’s Consolidated Statements of Income for the three and six months ended June 30, 2014 and 2013. There were no unrealized gains or losses included in earnings in the Level 3 fair value category relating to assets/liabilities still held at the reporting date for the three and six months ended June 30, 2014 and 2013.

Dominion Gas

The following table presents Dominion Gas’ assets and liabilities for commodity and interest rate derivatives that are measured at fair value on a recurring basis for each hierarchy level, including both current and noncurrent portions:


(millions)	Level 1		Level 2		Level 3		Total
At June 30, 2014
Assets:
Commodity	$	—	$	—	$	3	$	3

Liabilities:
Commodity	$	—	$	7	$	6	$	13
Interest rate		—		19		—		19

Total liabilities	$	—	$	26	$	6	$	32

At December 31, 2013
Assets:
Commodity	$	—	$	—	$	6	$	6
Interest rate		—		34		—		34

Total Assets	$	—	$	34	$	6	$	40
Liabilities:
Commodity	$	—	$	13	$	12	$	25

The following table presents the net change in Dominion Gas’ assets and liabilities for derivatives measured at fair value on a recurring basis and included in the Level 3 fair value category:


	Three Months Ended June 30,						Six Months Ended June 30,
(millions)	2014			2013			2014			2013
Beginning balance	$	(2	)	$	(1	)	$	(6	)	$	(12	)
Total realized and unrealized gains (losses):
Included in earnings		(2	)		3			(7	)		2
Included in other comprehensive income (loss)		(1	)		24			3			35
Settlements		2			(3	)		7			(2	)

Ending balance	$	(3	)	$	23		$	(3	)	$	23

PAGE 36

The gains and losses included in earnings in the Level 3 fair value category were classified in operating revenue in Dominion Gas' Consolidated Statements of Income for the three and six months ended June 30, 2014 and 2013. There were no unrealized gains or losses included in earnings in the Level 3 fair value category relating to assets/liabilities still held at the reporting date for the three and six months ended June 30, 2014 and 2013.

Fair Value of Financial Instruments

Substantially all of the Companies' financial instruments are recorded at fair value, with the exception of the instruments described below, which are reported at historical cost. Estimated fair values have been determined using available market information and valuation methodologies considered appropriate by management. The carrying amount of cash and cash equivalents, customer and other receivables, short-term debt, affiliated current borrowings, payables to affiliates and accounts payable are representative of fair value because of the short-term nature of these instruments. For the Companies' financial instruments that are not recorded at fair value, the carrying amounts and estimated fair values are as follows:


	June 30, 2014				December 31, 2013
	Carrying Amount		Estimated Fair Value⁽¹⁾		Carrying Amount		Estimated Fair Value⁽¹⁾
(millions)
Dominion
Long-term debt, including securities due within one year⁽²⁾	$	18,883	$	21,103	$	18,396	$	19,887
Junior subordinated notes⁽³⁾		1,373		1,392		1,373		1,394
Remarketable subordinated notes⁽³⁾		1,082		1,272		1,080		1,192
Subsidiary preferred stock⁽⁴⁾		134		141		257		261

Virginia Power
Long-term debt, including securities due within one year⁽³⁾	$	8,730	$	9,970	$	8,032	$	8,897
Preferred stock⁽⁴⁾		134		141		257		261

Dominion Gas
Long-term debt⁽³⁾	$	1,199	$	1,236	$	1,198	$	1,169

(1)

Fair value is estimated using market prices, where available, and interest rates currently available for issuance of debt with similar terms and remaining maturities. All fair value measurements are classified as Level 2. The carrying amount of debt issues with short-term maturities and variable rates refinanced at current market rates is a reasonable estimate of their fair value.

(2)	Carrying amount includes amounts which represent the unamortized discount and/or premium. At June 30, 2014 and December 31, 2013, includes the valuation of certain fair value hedges associated with fixed rate debt of approximately $54 million and $55 million, respectively.

(3)	Carrying amount includes amounts which represent the unamortized discount and/or premium.

(4)	Carrying amount includes deferred issuance expenses of $2 million at December 31, 2013.

PAGE 37

Note 9. Derivatives and Hedge Accounting Activities

The Companies’ accounting policies and objectives and strategies for using derivative instruments are discussed in Note 2 to the Consolidated Financial Statements in Dominion’s and Virginia Power’s Annual Report on Form 10-K for the year ended December 31, 2013 and Note 2 in Exhibit 99.11(b) to Dominion Gas’ Current Report on Form 8-K dated June 26, 2014. See Note 8 in this report for further information about fair value measurements and associated valuation methods for derivatives.

Derivative assets and liabilities are presented gross on the Companies’ Consolidated Balance Sheets. Dominion’s and Virginia Power’s derivative contracts include both over-the-counter transactions and those that are executed on an exchange or other trading platform (exchange contracts) and centrally cleared. Dominion Gas’ derivative contracts consist of over-the-counter transactions. Over-the-counter contracts are bilateral contracts that are transacted directly with a third party. Exchange contracts utilize a financial intermediary, exchange, or clearinghouse to enter, execute, or clear the transactions. Certain over-the-counter and exchange contracts contain contractual rights of setoff through master netting arrangements, derivative clearing agreements, and contract default provisions. In addition, the contracts are subject to conditional rights of setoff through counterparty nonperformance, insolvency, or other conditions.

In general, most over-the-counter transactions and all exchange contracts are subject to collateral requirements. Types of collateral for over-the-counter and exchange contracts include cash, letters of credit, and in some cases other forms of security, none of which are subject to restrictions. Cash collateral is used in the table below to offset derivative assets and liabilities. Certain accounts receivable and accounts payable recognized on the Companies’ Consolidated Balance Sheets, as well as letters of credit and other forms of security, all of which are not included in the tables below, are subject to offset under master netting or similar arrangements and would reduce the net exposure.

Dominion

Balance Sheet Presentation

The tables below present Dominion’s derivative asset and liability balances by type of financial instrument, before and after the effects of offsetting:


	June 30, 2014						December 31, 2013
	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Consolidated Balance Sheet		Net Amounts of Assets Presented in the Consolidated Balance Sheet		Gross Amounts of Recognized Assets		Gross Amounts Offset in the Consolidated Balance Sheet		Net Amounts of Assets Presented in the Consolidated Balance Sheet
(millions)
Interest rate contracts:
Over-the-counter	$	57	$	—	$	57	$	137	$	—	$	137
Commodity contracts:
Over-the-counter		195		—		195		240		—		240
Exchange		480		—		480		506		—		506

Total derivatives, subject to a master netting or similar arrangement		732		—		732		883		—		883
Total derivatives, not subject to a master netting or similar arrangement		7		—		7		7		—		7

Total	$	739	$	—	$	739	$	890	$	—	$	890

PAGE 38


			June 30, 2014								December 31, 2013
			Gross Amounts Not Offset in the Consolidated Balance Sheet								Gross Amounts Not Offset in the Consolidated Balance Sheet
	Net Amounts of Assets Presented in the Consolidated Balance Sheet		Financial Instruments		Cash Collateral Received		Net Amounts		Net Amounts of Assets Presented in the Consolidated Balance Sheet		Financial Instruments		Cash Collateral Received		Net Amounts
(millions)
Interest rate contracts:
Over-the-counter	$	57	$	30	$	—	$	27	$	137	$	—	$	—	$	137
Commodity contracts:
Over-the-counter		195		122		—		73		240		63		—		177
Exchange		480		479		—		1		506		505		—		1

Total	$	732	$	631	$	—	$	101	$	883	$	568	$	—	$	315


	June 30, 2014						December 31, 2013
	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Consolidated Balance Sheet		Net Amounts of Liabilities Presented in the Consolidated Balance Sheet		Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Consolidated Balance Sheet		Net Amounts of Liabilities Presented in the Consolidated Balance Sheet
(millions)
Interest rate contracts:
Over-the-counter	$	109	$	—	$	109	$	—	$	—	$	—
Commodity contracts:
Over-the-counter		334		—		334		262		—		262
Exchange		809		—		809		838		—		838

Total derivatives, subject to a master netting or similar arrangement		1,252		—		1,252		1,100		—		1,100
Total derivatives, not subject to a master netting or similar arrangement		4		—		4		2		—		2

Total	$	1,256	$	—	$	1,256	$	1,102	$	—	$	1,102


			June 30, 2014								December 31, 2013
			Gross Amounts Not Offset in the Consolidated Balance Sheet								Gross Amounts Not Offset in the Consolidated Balance Sheet
	Net Amounts of Liabilities Presented in the Consolidated Balance Sheet		Financial Instruments		Cash Collateral Paid		Net Amounts		Net Amounts of Liabilities Presented in the Consolidated Balance Sheet		Financial Instruments		Cash Collateral Paid		Net Amounts
(millions)
Interest rate contracts:
Over-the-counter	$	109	$	30	$	—	$	79	$	—	$	—	$	—	$	—
Commodity contracts:
Over-the-counter		334		122		4		208		262		63		69		130
Exchange		809		479		330		—		838		505		333		—

Total	$	1,252	$	631	$	334	$	287	$	1,100	$	568	$	402	$	130

PAGE 39

Volumes

The following table presents the volume of Dominion’s derivative activity as of June 30, 2014. These volumes are based on open derivative positions and represent the combined absolute value of their long and short positions, except in the case of offsetting transactions, for which they represent the absolute value of the net volume of their long and short positions.


	Current		Noncurrent
Natural Gas (bcf):
Fixed price⁽¹⁾		68		15
Basis		370		188
Electricity (MWh):
Fixed price		16,045,947		11,120,650
FTRs		73,646,672		—
Capacity (MW)		1,500		16,800
Liquids (Gal)⁽²⁾		75,768,000		—
Interest rate	$	1,600,000,000	$	3,925,000,000

(1)	Includes options.

(2)	Includes NGLs and oil.

Ineffectiveness and AOCI

For the three and six months ended June 30, 2014 and 2013, gains or losses on hedging instruments determined to be ineffective and amounts excluded from the assessment of effectiveness were not material. Amounts excluded from the assessment of effectiveness include gains or losses attributable to changes in the time value of options and changes in the differences between spot prices and forward prices.

The following table presents selected information related to gains (losses) on cash flow hedges included in AOCI in Dominion’s Consolidated Balance Sheet at June 30, 2014:


	AOCI After-Tax			Amounts Expected to be Reclassified to Earnings during the next 12 Months After-Tax			Maximum Term
(millions)
Commodities:
Gas	$	(5	)	$	(5	)		22 months
Electricity		(168	)		(141	)		30 months
Other		(1	)		(1	)		23 months
Interest rate		(179	)		(7	)		363 months

Total	$	(353	)	$	(154	)

The amounts that will be reclassified from AOCI to earnings will generally be offset by the recognition of the hedged transactions (e.g., anticipated sales) in earnings, thereby achieving the realization of prices contemplated by the underlying risk management strategies and will vary from the expected amounts presented above as a result of changes in market prices and interest rates.

PAGE 40

Fair Value and Gains and Losses on Derivative Instruments

The following table presents the fair values of Dominion’s derivatives and where they are presented in its Consolidated Balance Sheets:

Fair Value –
Derivatives under
Hedge Accounting

Fair Value –
Derivatives not under
Hedge Accounting

Total Fair Value

(millions)

June 30, 2014

ASSETS

Current Assets

Commodity

163

367

530

Interest rate

—

Total current derivative assets⁽¹⁾

197

367

564

Noncurrent Assets

Commodity

152

Interest rate

—

Total noncurrent derivative assets⁽²⁾

107

175

Total derivative assets

304

435

739

LIABILITIES

Current Liabilities

Commodity

419

484

903

Interest rate

—

Total current derivative liabilities

480

484

964

Noncurrent Liabilities

Commodity

131

113

244

Interest Rate

—

Total noncurrent derivative liabilities⁽³⁾

179

113

292